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Economic strength âlowâ Moody’s says TT outlook ‘stable’ but…

INTERNATIONAL credit rating agency Moody’s has held TT’s credit rating at “Ba1 stable,” in its latest update out November 1, although the country’s economic resiliency is “low.” According to the Moody’s rating criteria, though, that still puts the country at the highest tier of junk bond (high-risk) investment status.

Moody’s assessed Trinidad using four factors: economic strength, institutional strength, fiscal strength and susceptibility to event risk. TT scored “low” in the first two, moderate in the third and very low in the fourth.

Government’s fiscal strength was also “low”, while the government bond rating range was Baa3-Ba2, considered anywhere from “medium grade with some speculative elements and moderate credit risk” to “judged to have speculative elements and a significant credit risk.”

“Trinidad and Tobago’s credit profile is supported by large financial buffers, relatively high wealth levels, and significant international reserves, which limit external vulnerabilities. Those credit features mitigate credit challenges related to a policy response that has been unable to offset the impact of low energy prices on government revenue. A steady rise in government debt ratios has contributed to an erosion of sovereign creditworthiness,” Moody’s said.

The country’s credit strengths include: High income level relative to peers; financial buffers in the Heritage and Stabilization Fund and robust international reserves position

Moody’s said the stable outlook incorporates the expectation that capital revenue associated to asset sales would help reduce government borrowing requirements and lead to relatively stable government debt ratios around 6 per cent of GDP. It also captures the presence of sizeable fiscal buffers that limit downside credit risks, as well as the government’s ample access to a relatively deep domestic financial market.

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